EPFO Increases Auto Claim Settlement Limit to Rs 1 Lakh

The Central Board of Trustees (CBT) of the Employees’ Provident Fund Organisation (EPFO) has approved a series of significant measures aimed at enhancing returns for subscribers and improving the overall experience. The labour ministry announced the approval of a new ETF redemption policy, along with other policy amendments, on Saturday.

To boost income for EPFO subscribers, the CBT has approved a new policy for the redemption of exchange-traded fund (ETF) investments. Under the new guidelines, 50% of the redemption proceeds from ETFs will be reinvested into Central Public Sector Enterprises (CPSEs) and Bharat 22 funds.

The policy mandates a minimum five-year holding period for these investments, ensuring long-term stability and higher returns. The remaining proceeds will be allocated to other financial instruments, such as government securities and corporate bonds, to further diversify the investment portfolio.

The CBT has also approved guidelines for investing in units issued by public sector undertaking-sponsored infrastructure investment trusts (InvITs) and real estate investment trusts (REITs), regulated by the Securities and Exchange Board of India (SEBI). This move is expected to provide additional avenues for secure and lucrative investments, benefiting EPFO subscribers.

In a significant change to the EPF Scheme, 1952, the CBT has amended the interest payment provision for claims. Previously, interest was paid only up to the end of the preceding month for claims settled by the 24th of the month. With the new amendment, interest will now be paid up to the date of settlement, benefiting EPFO members by reducing grievances and ensuring more accurate financial returns.

The CBT has recommended the implementation of the EPFO Amnesty Scheme 2024, designed to encourage employers to voluntarily disclose and rectify past non-compliance or under-compliance without facing penalties or legal consequences. The scheme aligns with the employment-linked incentive scheme announced in the Union Budget 2024-25, which aims to foster employment generation and incentivize the formalization of jobs. This is expected to benefit many small establishments, particularly in the MSME sector.

The board has ratified an extension of the Employees’ Deposit Linked Insurance (EDLI) benefits, effective retrospectively from April 28, 2024. The insurance cover for dependents of deceased members has been increased, with a range now spanning from Rs 2.5 lakh to Rs 7 lakh. This change, supported by an actuarial surplus of Rs 6,385.74 crore, ensures that the EPF members' families receive uninterrupted financial support.

In a bid to simplify services, the CBT has increased the limit for auto claim settlements to Rs 1 lakh, up from Rs 50,000. This includes claims for advances related to housing, marriage, and education. Additionally, the board has relaxed the criteria for empanelling banks for the centralised collection of EPF contributions, lowering the minimum required share of total EPFO collections from 0.5% to 0.2%.

The board has also approved the full rollout of the Centralized Pension Payment System (CPPS) from January 1, 2025, as part of EPFO's IT modernization efforts. The CPPS will streamline pension disbursements for over 7.8 million pensioners across India, allowing them to access their pension from any bank or branch without the need for physical verification visits.

In FY24, EPFO successfully settled 44.5 million claims, amounting to Rs 1.82 lakh crore. In the current fiscal year, 38.3 million claims have already been settled, totaling more than Rs 1.57 lakh crore, demonstrating EPFO’s commitment to timely and efficient claim processing.

These new policies and changes aim to enhance the financial security and ease of access for EPFO members, supporting the government’s broader vision of improving financial inclusion and welfare for millions of workers across India.